Executive Briefings

Tied to Europe, Britain's Car Industry Is Vulnerable After 'Brexit'

By: The New York Times 12.28.2016

On Toyota's brightly lit assembly line here, workers guide wheel and engine assemblies into unfinished sedans. Driverless carts carry parts through narrow aisles to work stations. The assembly line moves with clockwork precision, able to pop out a vehicle every 72 seconds.

Britain's automotive industry, once ailing and plagued by strikes, now hums with the vibrancy of a global manufacturing hub. Most of the cars made in Burnaston, models like Auris and Avensis, will make their way beyond the British borders. Toyota buys parts and hires workers from across the European Union.

But the level of integration, previously lauded, has made the carmakers especially vulnerable after Britain's vote to leave the bloc. If a messy divorce follows, Toyota and others face the prospect of higher tariffs, a smaller labor pool and less access to the 500 million potential customers in Europe - all of which will be negotiated in the coming months and years.

The drop in the British pound since the vote has not been much help, either. Many of the carmakers' contracts here are priced in euros, even with suppliers in the same country like Johnson Controls, which makes seats for Toyota.

“We have made clear that if we lose some of these elements, it will make making cars in the U.K. less competitive,” said Anthony J. Walker, deputy managing director of Toyota Manufacturing in Britain. “We would have to reduce costs, which would be very hard.”

Britain's automotive industry, once ailing and plagued by strikes, now hums with the vibrancy of a global manufacturing hub. Most of the cars made in Burnaston, models like Auris and Avensis, will make their way beyond the British borders. Toyota buys parts and hires workers from across the European Union.

But the level of integration, previously lauded, has made the carmakers especially vulnerable after Britain's vote to leave the bloc. If a messy divorce follows, Toyota and others face the prospect of higher tariffs, a smaller labor pool and less access to the 500 million potential customers in Europe - all of which will be negotiated in the coming months and years.

The drop in the British pound since the vote has not been much help, either. Many of the carmakers' contracts here are priced in euros, even with suppliers in the same country like Johnson Controls, which makes seats for Toyota.

“We have made clear that if we lose some of these elements, it will make making cars in the U.K. less competitive,” said Anthony J. Walker, deputy managing director of Toyota Manufacturing in Britain. “We would have to reduce costs, which would be very hard.”